The current oil surge wouldn’t last and prices are likely to drop to $100 per barrel within two weeks, Bharat Petroleum Corp (BPCL) chairman has said, adding that there was no need for India to panic. “Russian oil and gas exports are not going to be blocked unless Russia itself decides to do so, which is unlikely,” BPCL chairman Arun Kumar Singh told ET.
He said Europe is also unlikely to stop importing energy from Russia, one of the world's largest exporters of oil and gas.
Crude oil prices soared to $139 per barrel on Monday after US Secretary of State Antony Blinken said the US and European allies are considering banning the import of oil from Russia. Prices eased a bit after Germany, the biggest consumer of Russian crude in Europe, rejected any such plan.
Russia has warned that rejection of its oil would be “catastrophic” for the global oil market and prices could rise to $300 per barrel. Oil is up nearly $30 per barrel since Russia launched the invasion of Ukraine and is currently trading around $127.
BPCL’s Singh said oil prices would give up the recent speculative gains quickly and fall to $100 per barrel in two weeks. It can fall further to $90 once the war concludes, he said. “There is no need for us to panic. We should just weather it out,” Singh said, adding that the prices were unsustainable. “World cannot afford the current prices. The global economy will slow down and there will be a correction in demand for crude,” Singh said. Sustained high prices can destroy 2-3% of global oil demand, which is about 2-3 million barrels per day, he said. This compares with Russia’s export of 5 million barrels per day of crude.
The contract for two Russian oil cargoes for April delivery to BPCL is being honoured, signalling an absence of supply issue, Singh said.
BPCL sources Russian cargoes from the spot market.
Indian refiners usually source 30-40% from the spot market and the balance under long-term deals with producers.
They also usually keep at least a month of inventory.
Crude is already lined up for processing in April, Singh said. Add to this a month of inventory and refiners are safe until May in terms of their crude needs.
State-run refiners need to increase domestic fuel prices by Rs 12-15 per litre to align them with international rates after keeping them static for more than four months due to assembly elections in five states, according to industry sources.
With the conclusion of voting, prices are expected to go up. The hikes will likely be gradual as companies may want to guard consumers against the volatility in the international market. Economists fear a full pass-through of fuel costs could ratch ..